Big 3 can help work for health

David Lazarus

Published 4:00 am, Sunday, October 29, 2006

Photo: REBECCA COOK

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General Motors Chairman and CEO Rick Wagoner announces a major restructuring of the world's largest automotive company during a news conference at the company's headquarters in Detroit November 21, 2005. General Motors Corp. said on Monday it will cut about 30,000 jobs or 9 percent of its total work force, close or curtail operations at 12 plants in North America and slash the amount of vehicles it produces by 1 million as it attempts to reduce costs by $7 billion. REUTERS/Rebecca Cook Ran on: 11-24-2005
Chairman and CEO Rick Wagoner announces plans Monday to cut 30,000 jobs at ailing GM.Ran on: 04-01-2006
Rick Wagoner, GM chairman, says he expects Delphi to honor its commitments. 0 less

General Motors Chairman and CEO Rick Wagoner announces a major restructuring of the world's largest automotive company during a news conference at the company's headquarters in Detroit November 21, 2005. ... more

Photo: REBECCA COOK

Big 3 can help work for health

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If there's any U.S. industry that knows about illness, it's the auto industry. And I don't mean the combined $7.5 billion in quarterly losses posted by Ford, Chrysler and General Motors last week.

Rather, I'm thinking about the industry's staggering health care costs -- an issue that's expected to figure prominently when the leaders of Detroit's Big 3 meet next month with President Bush at the White House.

The Big 3 spend more than $10 billion annually providing health coverage to workers and retirees. GM alone spends $5.3 billion a year on health care, making it the country's largest private-sector provider of coverage.

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For consumers, GM's health care expenses contribute about $1,500 to the cost of each vehicle sold. The company spends more on health care than it does on steel.

"It's reasonable to say that we're approaching a health care crisis in this country," said Greg Martin, a GM spokesman.

He declined to comment on what specifically GM's chief exec, Rick Wagoner, will say about health care when he sits down with Bush in mid-November or whether GM will propose any remedies for the economic burden faced by automakers and other large employers.

But Martin acknowledged that the auto industry can play a leadership role "to make the health care system more competitive and responsive to consumers."

A spokeswoman for Ford, which spends $3.5 billion a year on health coverage, declined to comment on the upcoming talks in Washington. No one at Chrysler could be reached to discuss the matter.

In any case, the White House signaled last week that Detroit shouldn't expect any favors on the health care front.

"To the extent that they made commitments, they've got to keep their commitments," Bush told CNBC. "There's a lot of people saying, 'Well, you need to take their, take their health, their benefits that they promised off their hands.'

"No, I don't think that's a proper role of government," he said. "They made a private contract with their employees. They need to keep it."

"We need to find a way to help moderate their dramatic increase in health care costs," he said. "We need to expand markets. We need to have a level playing field so they can sell their products abroad."

Hopefully, the leaders of the Big 3, which collectively employ nearly 400,000 U.S. workers and account for about 4 percent of the domestic economy, will impress upon Bush and Rove that a more focused effort is required to alleviate the problems faced not just by the auto industry but all businesses.

"It's an incredibly important issue for us and a very important issue for the country," GM's Martin said.

In other words, what's good for GM is good for America.

As this column has repeatedly observed, the U.S. health care system is a mess. Let us count the ways:

-- About 47 million Americans, or nearly 16 percent of the population, lack health coverage, according to census figures -- an abysmal statistic for the wealthiest, most technologically advanced nation on the planet.

-- Insurance premiums paid by employers and workers have nearly doubled since 2000, according to Menlo Park's Kaiser Family Foundation. The relatively modest 7.7 percent increase this year is still more than twice the rate of inflation.

-- Roughly a third of the $2 trillion spent annually on health care in the United States is squandered on bureaucratic overhead resulting from a vast array of insurance forms and clerical procedures, according to researchers at Harvard Medical School.

-- With about 77 million Baby Boomers set to retire, funding for Medicare will come up short by $32.4 trillion over the next 75 years, according to government projections. That deficit, largely the result of skyrocketing health care costs, is three times the size of the entire U.S. economy.

"Things are pretty bad," said Jim Reschovsky, a senior researcher at the Center for Studying Health System Change, a nonpartisan Washington think tank. "We cannot sustain health care costs that are increasing more rapidly than employee wages."

As such, he said, businesses like the Big 3 have a clear role to play in advocating reform -- as a matter of self-preservation if nothing else.

Thomas Rice, a professor of health services at UCLA's School of Public Health, agreed with this assessment. "The magnitude of the problem cries out for them to be doing something about this," he said.

But what? At the moment, it looks like the Big 3 are focusing primarily on slashing their health care costs by having workers and retirees shoulder a greater burden of insurance payments. That's obviously not a long-term solution.

What major employers like these need to do is use their considerable political clout to guide policy leaders toward meaningful reform of the U.S. health care system.

That could bring us eventually to a single-payer system similar to the universal coverage available in every other industrialized democracy. Or it could end up somewhere in between, with the federal government playing a greater role in meeting the needs of those with chronic health problems.

Clearly, though, urgent steps are required to standardize insurance payments and rein in growth in health care costs -- and this will require a partnership between the public and private sectors.

That's what the heads of the Big 3 should say when they get their audience with the president. That's what needs to get done.